LONDON (Reuters) -European stocks fell on Friday as investors fretted about the impact of interest rate hikes on growth, while the yen benefited from reports that academic Kazuo Ueda was set to be appointed Japan’s next central bank governor.
The MSCI World Equity Index was down 0.5% on the day at 1258 GMT, on track for its worst week since mid-December.
Europe’s STOXX 600 was down 1.5% and on track for a weekly loss, while London’s FTSE 100 was down 0.7%.
U.S. stock futures also fell, with Nasdaq e-minis down 1.2% and S&P 500 e-minis down 0.7%.
Maximilian Kunkel, chief investment officer for Germany and global family and institutional wealth, said that recent earnings reports, particularly for U.S. technology companies, have hit market sentiment.
“The focus is shifting away from the positive impact of disinflation towards concerns around growth.”
“People (are) realizing that the earning season hasn’t actually been all that great,” he said. “Investors are starting to expect lower profit margins as inflation comes down.”
The week was also dominated by hawkish comments from U.S. Federal Reserve officials.
Richmond Fed President Thomas Barkin said on Thursday that tight monetary policy is “unequivocally” slowing the U.S. economy, allowing the Federal Reserve to move “more deliberately” with any further interest rate increases.
The U.S. dollar index was up around 0.3% at 103.51, while the 10-year U.S. Treasury yield hit a new one-month high of 3.717%.
Money markets now expect a peak in the current Fed rate cycle at around 5.15% in July.
The yen broadly strengthened after reports that the Japanese government was set to appoint academic Kazuo Ueda as the central bank’s next governor.
The dollar was down 0.5% against the yen, with the pair at 130.84.
“The news surprised the market as he would bring a bit more of a hawkish tilt to monetary policy than the top contender, Masayoshi Amamiya,” ING said in a note to clients, adding that the market reaction could prove “temporary”.
“We don’t think he is expected to immediately change the BoJ’s policy stance,” ING said.
In Europe, German government bond yields edged higher, heading towards their most significant weekly rise so far this year as European Central Bank policymakers fought back against market expectations for a quick end to rate hikes.
The benchmark 10-year German yield was at 2.347%.
Britain’s economy showed zero growth in the final three months of 2022, gross domestic product data showed, narrowly avoiding recession.
Meanwhile, oil prices jumped more than 2%, heading for weekly gains, as Russia announced plans to reduce oil production next month.
Brent crude futures and U.S. West Texas Intermediate (WTI) crude futures were both up 2.1%.
Investor focus will now be on U.S. consumer price data due on Tuesday.
Source: Economy - investing.com
